New Indon investors place high hopes on Federal

(2006-01-20)


Growth prospects: Mr Latief, seen here with his wife Nancy, expects a jump in the demand for marine services - a growth opportunity for Federal

OIL & gas firm Federal International could be looking at a quantum leap in revenue if its latest major shareholders have their way - to US$1 billion within five years from slightly over S$100 million in 2004.

'The business strategy is for Federal to expand into marine services, engineering procurement and construction (EPC) as well as oil drilling services,' Rennier Latief told BT.

Mr Latief was speaking on behalf of his wife, Nancy Latief, and Syailendra Bakrie, the two new Federal investors who have pumped $13.44 million into the company. They own about a fifth of Federal now.

Mr Latief, commissioner of Jakarta-listed Energi Mega Persada (EMP), pointed out that marine activity in Indonesia is expected to pick up this year, thanks to the high energy demand from markets such as China and India.

He is expecting a jump in the demand for marine services such as FSOs (floating storage offloading vessels) and FPSOs (floating production, storage and offloading vessels) - a growth opportunity for Federal.

EMP itself plans to expand into marine oil exploration by renting some 10 new oil rigs in Sumatra, Java and Kalimantan over the next three months.

Federal on Wednesday announced a joint venture to charter specialised vessels to marine infrastructure companies and service providers.

EMP said that the general uptrend in oil exploration activity across Indonesia may also see total spending in the oil industry there hitting US$10 billion next year.

'Oil consumption has been rising by about 6.3 per cent every year, whereas replacement reserves are growing at only 8 per cent. That is why the slack has dropped to two million barrels per day last year and people are looking for sources of oil now,' it said.

EMP is looking to drill 60 new oil wells, contributing marginally to the figure of more than 1,000 wells expected to be drilled at various Indonesian locations this year.

Mr Latief said that this activity will mean a huge demand for equipment like tubing, well heads, pipeline, pumping - items that Federal already supplies to the exploration industry.

There are also plans for Federal to diversify into drilling services by acquiring drilling companies in Indonesia and to extend its technical management, procurement and logistical support for EPC projects to include the engineering and construction segments as well.

This will, Mr Latief said, help Federal clinch some EPC contracts for oil production facilities as well. In all, Federal is expected to net some US$100 million worth of contracts this year, of which about 50 per cent will be for marine services.

Other possible plans include extending the EPC services further to the liquefied natural gas industry as well. This is expected to help increase Federal's revenues to more than US$200 million next year.

The new major shareholders expect to reap a return of more than 20 per cent every year, with a break-even period that is shorter than five years.

《The Business Times》

  

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